Financial Literacy in CWS and SSH

Financial Literacy in CWS and SSH: An OHASSTA-OHHSSCA Collaborative Project

Ontario History and Social Sciences Teachers'

Ontario History and Social Sciences Teachers' Association

Financial Literacy Lesson Plan CIC3E

Funding from the Ontario Ministry of Education 2011

Financial Literacy Lesson Planning Template 2011 Financial Literacy Lesson Plan CIC3E

Connections to Financial Literacy

Describe the financial literacy knowledge and skills which will be addressed and assessed in this lesson. Financial literacy knowledge and skills could include, but are not limited to:

 understanding needs and wants;  consumer protection and consumer awareness;  personal financial planning such as budgeting, saving and investing;

Making Economic Choices, Grade 11, Unit #: Day #: (Title) Workplace Preparation (CIC3E) Curriculum Expectations Learning Goals Economic Stakeholders: Overall: identify the factors that influence consumer demand and the At the end of this lesson, students will skills used by consumers to maximize their satisfaction in the understand marketplace; Specific: Consumers 1. The cost of borrowing. – identify the rights (e.g., to fair treatment, honest advertising) and 2. The terms and conditions of borrowing responsibilities (e.g., contractual obligations) of consumers; options. – differentiate between consumer wants and needs and consumer 3. How to identify a good borrowing option from a bad borrowing option. demand (e.g., consumers’ willingness and ability to pay for goods and 4. Buying what you can afford/making services); wise money choices – explain the factors that influence consumers’ ability to pay for goods and services (e.g., their income, assets, and creditworthiness); – follow the appropriate steps in analysing a specific consumer choice (e.g., a car purchase, continuing education) and method of payment (e.g., cash, instalments, credit).

Methods of Economic Inquiry and Communication: – apply economic concepts (e.g., opportunity cost, demand, supply) to identify and describe economic choices (e.g., to spend or to save) that consumers face;

Instructional Components and Context

Readiness Materials Link back. Computer and Projector Chart paper and markers It is assumed that students have already learned Advertisements with promotional messages of Buy Now Pay Later cost-benefit analysis and the difference between a BLM1-4 need and a want.

Terminology Interest rate, compound interest, minimum payments, credit worthiness, credit score, borrowing cost, credit bureau

Financial Literacy Lesson Planning Template 2011 Minds On Connections  Establishing a positive learning environment Explicitly label:  Connecting to prior learning and/or experiences Assessment for  Setting the context for learning learning

Assessment as learning

Whole Class: Assessment for learning (Approx 25 min) Computer and Projector Begin with You Tube Video from Investor Education: Credit Card Game Show http://www.youtube.com/watch?v=g6_YvIhPKMk

Description Students will view three people who purchased the exact same good on their credit card, yet they all paid different amounts (due to the payment options the individual consumers selected).

The goal is to help students understand the cost of borrowing to pay for a good or service.

Have a class discussion about the choices made by the three individuals. Discuss the pros and cons of each individual’s choices, and the use/need of credit cards in general.

Discuss the following: (possible option is to write these on chart paper and keep them posted for the remainder of the activity- depending on the level of the class teachers may wish to extend this list)

Credit Crads Interest rates- compounding interest Minimum payments Late payments Cash Advances Debt Consolidation Credit score Credit bureau Collection agencies

*TEACHER NOTE: For a glossary of financial terms visit http://www.globeinvestor.com/resources/glossary/

Action! Assessment as  Introducing new learning or extending/reinforcing prior learning learning  Providing opportunities for practice and application of learning (guided > independent)

Financial Literacy Lesson Planning Template 2011 Becoming a Smart Consumer (a series of mini activities) Assessment as learning Part 1: Advertisements, markers, chart Part 1: Reading the Fine Print: Graffiti Art paper, glue, BLM1 orBLM2 In Groups of 2-4: (Approx 50 min) Newspaper Clips: Give each group a newspaper clip with an advertisement promoting a Buy Now, Pay Later message.

Description 1. Glue the Advertisement on a large sheet of chart of construction paper. Have students graffiti their questions on the sheet with markers.

2. Have students read the fine print, and create questions about what it implies. Have each group share one burning question with the class. The questions should all roughly lead to the same point. (see below*)

*TEACHER NOTE: The main point of all these advertisements is the same: Companies want people to purchase the good at zero interest for a short time in the hopes the consumer will not pay until the promotion has ended. Also explain to students the hidden concept of retro active compounding interest. (That is, if you begin to pay after the promotion has ended, the company will calculate what you owe from the day you purchased the good, not the day the promotion ended. Moreover, most of these companies charge 30% annual interest which is higher than the major credit card 20%). Relate this back to the credit card video in the minds on. This has the same financial cost as the third character. Be sure to explain to students that interest is paid only on balances. That is, if a person pays their full balance when the bill comes in, they don’t pay interest. Interest is only calculated on what you owe after the payment due date. For a video explanation of credit card debt go to: Credit Card Debt Explained With a Glass of Water http://www.youtube.com/watch?v=Vz05A6cP6Iw&feature=related

Answers to student questions can be found in the article: (BLM1 and or BLM2)

3. Have students read the article, highlighting the points they found interesting and/or have questions about.

Avoiding the Buy Now Pay Later Trap (BLM1): http://www.ctv.ca/CTVNews/CanadaAMColumns/20100305/foran_blog_100305/

OR, Buy Now Pay Later, The Never Never Plan (BLM2): http://creditsolutions.ca/budgeting/buy-now-pay-later

4. After reading and discussing the article as a class, have students go back to the graffiti questions of another group and try to answer them- do multiple rounds so students can see more than one groups questions. (Do this as a silent gallery walk where students answer each other’s questions by writing the answers or other group’s sheet).

Financial Literacy Lesson Planning Template 2011 Part 2: Game: Deal or No Deal? Computer and projector, BLM3(teacher), Assessment for learning: Open with a video: BLM4(Students) Funny Man Investor Series: Buying a Car. Green and Red Card for each group. *TEACHER NOTE: Before the video begins, ask students to take note of how and when to identify a good deal. They will use these skills to play the game that follows. http://www.youtube.com/watch?v=2TzIz5CrZs8

Assessment as learning: Game: Have students form groups of 2-4. Give each group a green red flash card (Green reads DEAL, Red reads NO DEAL) Read each scenario found on BLM3 (teacher), and give students BLM4 The objective of the game is to present students with realistic scenarios and have them determine and justify why they think it is a good “deal” or a “no deal”.

*TEACHER NOTE: Explain to students the correct answer comes from the justification not the selection of the deal or no deal. That is, what is a deal for one consumer may not be for another due to needs and wants, income level, taste and preference etc… The instructions for the game are located on BLM3, along with possible answers.

Consolidation Assessment as  Providing opportunities for consolidation and reflection learning  Helping students demonstrate what they have learned

Financial Literacy Lesson Planning Template 2011 Whole Class :

Assessment for learning: Video: School House Rock- Where the Money Goes. (Topic: Computer and projector, and needs vs. wants, and budgeting/saving) BLM5

*TEACHER NOTE: After students have seen the video, have them address the difference between a want and a need. (This is assumed to be review), and now add how the boy in the video budgeted and saved for his want. Brainstorm as a class other methods of budgeting and saving for a want- which is “money wise financial planning”, as opposed to poor financial planning, such as using a credit card to pay for something you cannot afford to buy.

Assessment as learning :Description Now that students have understood the cost of borrowing and consumer responsibilities, consolidate student’s learning by discussing (after the video) sound financial options of obtaining a good or service. (See the above teacher note)

Have each student think about a “want” (ex. I want the new I-phone 4G), and list all their financial responsibilities. Once they have completed the list, have them create a “money wise financial plan”, like the boy and his father did in the above video, showing how they will obtain their want. BLM5

“money wise financial plan”: Examples can be: 1.A Reallocation of Money/Cutting Cost (i.e. bring lunch from home, and not buying lunch at the school cafeteria. Reducing downloads and apps on the cell phone, talking less during billable hours). 2. Earning More Money- finding a part time job, working more hours, asking for a raise.

*TEACHER NOTE: ADDITIONAL TEACHER (and student friendly) INFORMATION and RESOURCES on any of the topics covered in this activity can be found at http://www.getsmarteraboutmoney.ca

Financial Literacy Lesson Planning Template 2011 BLM1 Pat Foran on avoiding the 'buy now pay later' trap

CTV's consumer affairs specialist Pat Foran

Date: Friday Mar. 5, 2010 1:03 PM ET

Want a new TV but don't have the money? Maybe you need a new washer/dryer or even a new bed? Why not buy now and pay later? It's what millions of Canadians do every year – but many of them are getting caught with unexpected interest payments when they miss their due date.

We've had many complaints from viewers who were not aware that if they missed paying in full the amount they borrowed on a deferred payment plan, they can be charged compound interest back to day one!

Martin Campbell told CTV News when he needed new hardwood flooring he went to Home Depot. He says he had the cash but accepted an offer to make no payments, interest free for a year.

Campbell told us "I bought $2,500 worth of flooring and they offered me an interest free credit card - so I said sure. It sounded like a good idea at the time."

Over the course of the year he moved and stopped receiving statements. When he went to pay his bill he was three months late and was hit with interest charges of 29 per cent - compounded from the day he bought the flooring.

"I was shocked when I realized there was $900 interest added to my account."

Credit counselors know all about people being hit with surprise interest charges. Laurie Campbell with Credit Canada says while some consumers do have the money but forget to pay on time -- most of her clients just can't afford to pay in full when the bill comes due.

"People who do the ‘don't pay a cent event' do it because they can't afford the furniture and they hope when the year rolls around they will be in better shape -- but often they aren't and when the bill is due they can't even begin to pay for it."

Home Depot says it makes its customers aware of its deferred payment plans with information in the store, in brochures and online. The company told us "The Home Depot, with our partner Citi Cards Canada, offers a number of special payment plans. Eighty per cent of our customers… pay off their account before any interest is charged."

Financial Literacy Lesson Planning Template 2011 Campbell admits he forgot to pay before the year was up. He says by keeping his money in the bank he made only $30 in interest but it cost him a $900 interest penalty. He says he won't take part in a deferred payment plan again.

Campbell said "I asked for a pair of scissors and cut up the card on the spot. I want to make sure I don't ever do that zero interest plan again."

Key points:

 "Buy now pay later" programs are known in the credit and financing world as deferred payment programs or accounts.  The "interest-free" period generally ranges from six to 24 months, so it can be a good way to buy big-ticket items, as long as long as you pay it off in time.  If you don't pay off the balance by the due date, the annual rate of interest on a deferred payment scheme can range between 25-30 per cent and even higher  Sometimes there is also a deferral fee in addition to the cost. These fees can be a flat amount ranging anywhere from $25-75 or a percentage of the amount to be financed.  Pat suggests the bottom line is that if you can't afford it now, you may not be able to afford it later.  If you do decide to go with a no money down, no payments, no interest plan make sure you understand your obligation completely, write down the due date on a calendar and be sure to pay off the amount weeks ahead to allow for processing time.  Pay off as much as you can if you cannot pay off the full amount and keep in mind if you only pay the minimum monthly payment you could end up paying two to three times more than that couch or TV is worth.  The best advice? If you can't afford it now -- what makes you think you can afford it later? So save your money, buy used or do without if possible. Almost all of these plans have interest rates of 28 per cent or more.

Financial Literacy Lesson Planning Template 2011 BLM2

Buy Now- Pay Later: The Never…. Never Plan

Many stores offer the buy now …don’t pay until – next year programs.

If you cannot afford the item today what makes you think that you will be able to afford it in the future – ask yourself.

What is going to change financially so that I will be able to afford to purchase this item? Where will the money come from?

At this time of year the never never purchase plan seems to appeal to many consumers – Consumers, that perhaps do not understand the full impact of these plans. If you are considering a buy now pay later purchase – read on - this is for you.

Consumers looking for big-ticket items are being bombarded with all sorts of deals designed to provide instant gratification without the pain of forking over their hard earned dollars for months or even years to come.

The lure – Buy Now! Pay Later! - FREE - no costs plans – or are they?

Free Money – Marketing at its best Deferred payment plans are everywhere these days – partly because of low interest rates and the fear that consumers might stop spending. Ever wonder how these programs work. Are they really free money no interest? Not a chance! However, for some consumers that pay their bills in full when they are due, it is possible to get a bargain – if you negotiate a discount on your purchase price before you buy.

While the offer may be enticing be forewarned that you could get caught up in the hype of the season and the marketing pitch. So you could end up paying high interest if you don’t pay the balance in full on the exact due date.

Some retail stores require the consumer to place the purchase on the retailers’ credit card – many of these credit cards charge interest rates of 28.8% per year.

As many as 46% of credit card users do not pay their credit card balances in full at the end of each month – with the result that these stores are making very large sums of money in interest charges by lending consumers the money to make the purchase.

Buyer Beware Some of these retailers sell the loans to finance companies and many consumers find themselves dealing with a finance company that under any other circumstances they would

Financial Literacy Lesson Planning Template 2011 never have considered borrowing money from. So be aware of what you are signing - Read the agreement – Ask questions.

Fees Don’t think that you are going to walk out of the store without paying a red cent. You can expect to pay at the very least a fee ranging from $35.00 at the Bay to $49.95 at the Brick for the privilege of buying now and paying later. Add to that another 14.50 % to cover the taxes on the purchase price. The Taxman does not defer the taxes – although some companies advertise that they will pay the taxes for the consumer.

Again read the fine print – ask questions make sure your answer is in writing.

Payment Due Dates Deferred payment dates can range from six months to two years. Watch the payment date – some of these programs have a clause that states if you do not pay on time the full balance, the interest charge runs from the date of the purchase at 28.8% not the date the payment was due. So you could end up paying interest charges from the date you purchased the item.

If you buy now and pay later you are assuming that you will still be employed in a year or two and that if you cannot afford the item today something will change so that in two years you will be able to afford it. What if nothing changes and you can’t afford it. Now it will cost you a great deal more that you ever thought possible.

Save Your Money If you are considering making a big-ticket purchase and cannot afford to pay cash for it, visit your bank and ask for a line of credit the interest rate is guaranteed to be lower than you will pay if you get involved in a buy now pay later plan. Nothing in this life is free especially credit –don’t take on more debt this season than you can afford.

A fond memory will last forever – do something kind for someone else this season.

Give a gift from your heart not your credit card.

Remember, if you are experiencing financial difficulties do not wait. Speak to a professional today.

Do you have a story that you would like to share about your experience with a debt collector? Email me - [email protected]

Margaret H. Johnson ACE. RQIC is president of Solutions Credit Counselling Service Inc. and Women and Money Inc. She can be reached by e-mail at [email protected] Or call toll-free in Canada - 1 877 913 2008 Phone: (604) 588-9491 Fax: (604) 588-9007 © Solutions

Financial Literacy Lesson Planning Template 2011 Credit Counselling Service Inc.

BLM3 Instructions: Create groups of 2-4. Give each group a green (deal) and a red (no deal) sign. Read the scenario to the class and give each group a couple minutes to decided and justify why they believe the choice made to be a ‘deal’ or ‘no deal’. Have each student write the choice and justification on BLM4. Once the time has ended, ask one student from each group to hold the sign up. Then select some of the students to justify their group’s decision to the class. Ensure by the end of the 5th round that all students have spoken at least once.

Scenario 1: Deena is moving into her first apartment with a roommate, and they both need beds, a couch, a TV, and a kitchen table with chairs. Neither of them have a lot of money to buy new furniture, and have been looking to buy some used furniture. While watching TV Deena sees a commercial for Lenny’s Furniture store stating “For this weekend only, take advantage of the don’t pay a cent event for one year. No money down, no interest, not even the taxes. You don’t pay.” Deena and her roommate rush out to buy furniture for their apartment. Deal or No Deal?

Possible Answers: Deal: If Deena and her roommate make a financial plan to pay their entire bill (a little each month, every month) before the year is over, this is a deal, because they will have purchased on credit and not have paid any interest. No Deal: If Deena and her roommate cannot afford to pay for all the furniture within 12 months they will owe a lot of money in interest. Moreover, the interest is retroactive, so they will already owe a years’ worth of interest when the bill comes. This means they will end up paying double for the furniture they bought. It would have been better to buy used furniture, and buy things when they have the money.

Scenario 2: Christoph has been saving his money to buy a new computer for school. The computer he wanted with the tax came to $832.86. When Christoph went to pay for his computer the sales person asked if he’d like to pay on his Best Shop credit card. When he said he didn’t have a Best Shop credit card and he’d like to pay with his debit card, the sales person informed him that by opening a Best Shop credit card and using it to pay for the computer, he could save 20% off his first purchase. Cristoph declined and used his debit card. Did he get a Deal or No Deal?

Possible Answers:

Financial Literacy Lesson Planning Template 2011 Deal: Christoph saved his money and paid in cash. He does not owe any interest on the computer. No Deal: Christoph should have kept the money in the bank and opened a store credit card to save 20% on his computer. He could then pay the bill in full with the money in the bank and avoid paying interest and keep 20% of what he saved in the bank.

Scenario 3: Ashim has two credit cards. Hero Card has been paid off in full and Canadian Speed has a balance of $1150 at 19.95% annual interest. One day he received a letter and checks from the Hero Credit card company offering him a promotional offer on a cash advance for 5.99% interest for 6 months (regular rate is 26.95%). After reading the fine print he learned that he would also have to pay an additional 1%, and a transaction fee of $7.50. However, the fine print also said if he was late on a payment during the 6 months the promotion would end and the interest rate would jump to 23.95%. He wondered if he should take the cash advance from one credit card to pay the other. After talking with his dad he decided it was a good idea to take a cash advance of $1200 at 5.99% and make a payment of $1150 on his outstanding balance with the Canadian Speed credit card company. Did Ashim get a Deal or no deal?

Possible Answers: Deal: Ashim got a Deal if he is not late on a payment and if he pays his balance with Hero Card within six months. It will be faster for Ashim to pay back $1200 at 6.99% (5.99 +1), than it is at 19.95% because he is paying less interest and more principle every month. No Deal: If Ashim misses a payment with Hero Card he will pay even more interest than if he had kept his owing balance with Canadian speed. Also, if he doesn’t pay off the full amount of $12,000 at the end of six months he will owe 26.95% interest, not 19.95%. Again, he will end up paying more in interest and it will take him longer to pay down his debt.

Scenario 4: Salem went to the mall to buy new shoes for school. She had enough cash to pay for the shoes she wanted but when Salem went to the store there was a promotion that read “Buy one – get the second at half off”. Salem ended up buying two pairs of shoes because she thought it was a good deal. However, she didn’t have enough cash to pay for both, and put the entire purchase on her credit card. Deal or No Deal?

Possible Answers: Deal: If Salem does not spend the money she has, and saves some money before her credit card bill comes she can pay her bill in full and not pay interest. No Deal: Salem did not need two pairs of shoes, she spent money she did not have. When the bill comes in she will most likely end up paying interest on her purchase.

Financial Literacy Lesson Planning Template 2011 Scenario 5: Omar needs money today for his little brother’s birthday party. He has promised to buy the food for the party and a gift. The problem is that he does not get paid for another two days. Omar does don’t have a credit card but he does have over draft on his account (overdraft is when you are allowed to go below zero dollars in your bank account, but you are charged a dollar fee and an interest rate for doing so). Omar is debating between going to pay day loan shop for a pay check advance or using his overdraft for the amount needed today. If Omar goes to payday loans he will get his entire pay check, but will have to pay them 10% of his pay. On the other hand if he uses his overdraft he will pay a flat fee of $5.00 for going below zero dollars on his account. Omar decides to use his overdraft for the exact amount the needed. Deal or No Deal?

Possible Answers: Deal: Given the two options overdraft is a better option because Omar is only taking the amount he needs and will pay back into his account when his pay check comes in. No Deal: Omar could use the money he has for food and buy the gift a couple days later when he gets paid.

Financial Literacy Lesson Planning Template 2011 BLM4 DEAL OR NO DEAL Circle Deal or No Deal Write your justification in the space provided.

Scenario 1 Deal or No Deal? Justification:

Financial Literacy Lesson Planning Template 2011 BLM5 WHERE MY MONEY GOES

What I want: ______Cost: ______if I buy it at ______

The things I need to pay for: Cost: 1. $ 2. $ 3. $

My Monthly Income is: $______

My “money wise” financial plan to get what I want is: (Hint: Think back to the boy in the video. What did he do to afford the trip he wanted? Can you apply some of those “money wise” principles, or can you think of some of your own?)

Based on my “money wise” financial plan it will take me ______months to afford what I want.

Financial Literacy Lesson Planning Template 2011